Pakistan eyes bigger China swap line, expects US financing decision soon

Pakistan plans to extend its 30 billion yuan swap line with China beyond its 2027 expiration, Finance Minister Muhammad Aurangzeb announced. The minister anticipates a US response on a proposed $10 billion exchange stabilization facility within two months, alongside potential support from the Export-Import Bank of the United States (EXIM) and the US International Development Finance Corporation (DFC).

Both China and the US are significant strategic partners for Pakistan, with ongoing discussions taking place. The country remains vulnerable to external financing for foreign exchange reserves and debt repayments, making support crucial. Pakistan currently holds the entire 30 billion yuan swap line from China but will formally request additional financing at the renewal.

The government expects to receive a response from the US within two months regarding the $10 billion facility. Additionally, EXIM financing could assist Pakistan International Airlines in purchasing aircraft, and DFC could fund a $5 billion program to upgrade oil refineries. Despite elevated crude oil prices resulting from recent Middle East conflict, Pakistan has managed the initial price spike effectively.

However, prolonged disruption could jeopardize the government's 4% growth target. Pakistan has enough oil stocks to cover needs through September and is prepared for October, with November planning underway. The government does not plan to seek additional International Monetary Fund (IMF) financing or emergency support. An IMF mission is scheduled for next week to review Pakistan's $7 billion program and third review of its Resilience and Sustainability Facility.